British Finance Minister Rishi Sunak told the Bank of England on Monday to look into the case of a new “Britcoin”, or a digital currency backed by central banks, aimed at addressing some of the challenges posed by cryptocurrencies such as bitcoin.
A digital version of the pound, backed by the BoE, could allow businesses and consumers to hold accounts directly with the bank and bypass others when making payments, enhancing the role of creditors in the financial system.
“We are launching a new working group between the Treasury and the Bank of England to coordinate exploratory work on a potential central bank digital currency (CBDC),” Sunak told a financial industry conference.
Shortly afterwards, Sunak wrote a single word “Britcoin” on Twitter in response to the finance ministry’s announcement of the working group.
Other central banks are also looking at creating digital versions of their own currencies, essentially broadening access to central bank funds that only commercial banks can currently use. This could speed up internal and external payments and reduce the risks of financial stability.
China is a leader in launching a CBDC. Last week, the European Central Bank said it was studying an electronic form of cash to complete banknotes and coins, but any launch is still a few years away.
The BoE said a digital version of the pound will not replace either the physical cash or the existing bank accounts.
“The Government and the Bank of England have not yet made a decision on the introduction of a CBDC in the UK and will be working extensively with stakeholders on the benefits, risks and practices of doing so,” the BoE said.
BoE Governor Andrew Bailey previously said that Bitcoin, the most popular cryptocurrency, fails to act as a stable stock of value or as an efficient way to trade, making it inadequate to serve as a currency and a risky bet for investors.
Central banks also had a weak picture of Facebook’s efforts to create its own digital currency.
Even so, cryptocurrencies have received growing interest from major financial institutions, and bitcoin hit a record high of almost $ 65,000 on April 14, ten times in a year.
DARK TRADE
Sunak, who launched the UK FinTech Week conference, also announced other measures to maintain the post-Brexit competitiveness of London, which rivals New York to be the world’s largest financial center.
Since the UK left the European Union on 31 December, the financial sector has faced restrictions on serving EU customers.
Sunak has proposed removing inherited restrictions from the EU, including on who can trade shares in London and the double-volume ceiling.
This would help the UK attract more “dark” or anonymous transactions from large investors, after Amsterdam overthrew London as Europe’s main stock trading hub in January.
“The consultation process aims to provide a fair, results-based and competitive handbook of rules, while ensuring that the UK maintains the highest regulatory standards,” Sunak said.
The UK would also propose changes to the companies’ stock prospects to ensure the rules are “not too burdensome”, Sunak said.
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